In 2008, the plaintiff took out an $18,000 educational loan from Sallie Mae, a private, for-profit corporation. The loan was later assigned to another for-profit company, Navient. In 2012, the plaintiff filed for bankruptcy and listed the educational loan in his petition. The bankruptcy court issued a final decree of discharge, which stated that the plaintiff was "released from all dischargeable debts." However, the bankruptcy court in 2013 did not opine on whether the plaintiff’s private educational loan was in fact discharged. Navient sent the plaintiff a letter asserting that his educational loan was not discharged. The plaintiff and Navient executed a loan modification agreement and the plaintiff made payments on the loan between 2013 and 2017. The loan modification agreement and these payments were communicated to the defendant Experian and reflected in the plaintiff’s credit report.
In 2019, the plaintiff brought an action against Experian in the Southern District of New York under the Fair Credit Reporting Act (“FCRA”) and its state analog, the New York Fair Credit Reporting Act ("NYFCRA"), for continuing to include the educational loan on his credit report.
The district court granted summary judgment in favor of Experian.
The plaintiff appealed.
On appeal in Mader v. Experian, No. 20-3073 (2d Cir. 2023), the United States Court of Appeals for the Second Circuit affirmed the district court’s order granting summary judgment to the defendant (at 271).
The Second Circuit explained that the relevant provision of the FCRA (15 U.S.C. § 1681e(b)) states that when preparing credit reports, credit reporting agencies "shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." Therefore, to prevail on a section 1681e claim against a consumer reporting agency, it is necessary for a plaintiff to establish, among other things, that a credit report contains an inaccuracy. However, the Court noted that the term "accuracy" is not defined in the FCRA. Therefore, the Court looked to dictionary definitions and stated that an inaccuracy must be "patently incorrect or misleading." Inaccuracies that turn on legal disputes are not cognizable under the FCRA. Claims under the FCRA require factual inaccuracies to be actionable (at 270).
The Court held that the "inaccuracy" alleged by the plaintiff did not meet this statutory test because it evaded objective verification. There was no bankruptcy order explicitly discharging the debt and both Navient and the plaintiff continued to treat the debt as outstanding following the plaintiff’s bankruptcy. Therefore, it was not cognizable under the FCRA (at 269).
The Court clarified that its ruling does not mean that credit reporting agencies are never required by the FCRA to accurately report information derived from the readily verifiable and straightforward application of law to facts. If a legal question is sufficiently settled so that the import on a particular debt is readily and objectively verifiable, the FCRA sometimes requires that the implications of that decision be reflected in credit reports. What the FCRA does not require, however, is that credit reporting agencies resolve unsettled legal questions like the one at issue in this case (at 270-271).